Sir Alex Ferguson is the most successful coach or manager in the history of professional sports. Before retiring this past May, Ferguson was Manchester United’s manager for 26 seasons, during which he achieved unprecedented success. During his tenure, the club won 13 English league titles along with 25 other domestic and international trophies, including two Champions League titles, and changed the face of professional football. In 2012, Harvard Business School professor Anita Elberse had a unique opportunity to examine Ferguson’s management approach and developed a Harvard Business School case study around it. She and Ferguson have also collaborated on an analysis of his enormously successful management methods. A review of it — together with two Ferguson autobiographies (see here – I have an autographed copy — and here) and watching carefully as a football fan over many, many years – has revealed some excellent guidance from Sir Alex with respect to all aspects of management, even money management. I will focus on five.
- Ruthlessly and quickly cut your losses. Sir Alex was always quick to eliminate players he thought had become liabilities, even stars like David Beckham, Paul Ince, Ruud van Nistelrooy and the great captain, Roy Keane. Sometimes he was too quick, as he was with Jaap Stam (as he has since conceded), but waiting too long is more dangerous. “There are occasions when you have to ask yourself whether certain players are affecting the dressing-room atmosphere, the performance of the team, and your control of the players and staff. If they are, you have to cut the cord. There is absolutely no other way. It doesn’t matter if the person is the best player in the world. The long-term view of the club is more important than any individual, and the manager has to be the most important one in the club” (link).
- Think Scientifically. As Sir Alex said, “ Although I was always trying to disprove it, I believe…”. That’s thinking like a scientist — always using falsification to try to get closer to the truth (which can’t be fully established). If we are going to be successful, we need always be looking to disprove what we believe and to accept it when it happens (despite our being so susceptible to confirmation bias, motivated reasoning and bias blindness).
- Set high standards. “Everything we did was about maintaining the standards we had set as a football club” (link). When things don’t go the way we’d like (and that is guaranteed to happen), it’s easy to let our standards slip so that we can always meet them. That’s why money managers so often pick inappropriate benchmarks or change benchmarks to report performance. Keep your standards high and set out to meet them every day.
- Constantly adapt. “Most people with my kind of track record don’t look to change. But I always felt I couldn’t afford not to change. We had to be successful — there was no other option for me — and I would explore any means of improving” (link). If we’re going to be successful, change is a requirement. What works today won’t necessarily work tomorrow.
- Observe — continuously and carefully. As Barry Ritholtz emphasized Friday, we need more signal and less noise. “Once I stepped out of the bubble, I became more aware of a range of details, and my performance level jumped,” Ferguson noted. “I don’t think many people fully understand the value of observing. I came to see observation as a critical part of my management skills. The ability to see things is key — or, more specifically, the ability to see things you don’t expect to see.” When I committed to “turning off the noise” (like CNBC) and began planning for (and following through on) regular reflection — systematically thinking about things without distractions — my productivity and the quality of my work increased dramatically. Try it.